251. Telegram From the Department of State to the Embassy in Brazil 1

182. For information Embassy, following is summary from Eximbank of discussions with Brazilian delegation.

Following new discussions with IMF, Brazilians represented 1958 deficit in dollars and ACL currencies to be approximately $320 million, but stated that cash deficit in both type currencies between now and end of year equal $200 million. It was explained that this included $150 million US dollar deficit and $50 million deficit in ACL currency. Brazilians then stated necessity of receiving total credit of $150 million from Eximbank in order that they might obtain additional credits from commercial banks to satisfy ACL currency deficit.

Out of the $150 million needed for US dollar deficit, $68.5 million is payable to US commercial banks prior to December 31. Congress has on numerous occasions criticized Eximbank for extending credit to “bail out” commercial banks. Accordingly, Eximbank informed Brazilians (1) that it was not in a position to refinance ACL deficit; and (2) that it was not in a position to refinance the entire amount payable to commercial banks. It thereupon offered to lend $100 million for 8 years with no principal payments during the first 3 years, provided arrangements could be made with commercial banks to obtain total of $50 million.

Brazilians stated that they did not want to seek loans in Europe, although Poock Correa informed May that funds would be readily available in Europe but that the rate of interest would be 7%. Eximbank took the position that it would not stand in the way of attempts by Brazilians to obtain $100 million in private market in US, but expressed the opinion that such course would be unwise in view of present heavy obligations in dollars over the next few years.

Brazilians then went to New York to visit banks and reported favorable reception. It was suggested that Eximbank might be of assistance by explaining situation to commercial banks. Arey talked to all commercial banks involved and found extreme reluctance and, in fact, some strong opposition to extending any further assistance to Brazil for the purpose or in the manner requested. After lengthy conversations, banks have appeared to understand position of Eximbank and indications are that they will be prepared to go along for approximately $50 million. The attitude of Brazilians that they can easily [Page 691] obtain funds from New York banks in addition to a $150 million loan from Eximbank appears entirely unrealistic based on conversations between Eximbank and commercial bankers.

Brazilians now stating that loan of $150 million in US dollars not sufficient. This is not supported by their own statistics.

National Advisory Council today supported Eximbank position and approved consideration by Eximbank of credit of $100 million to be supplemented by credits aggregating $50 million from commercial banks.

Dulles
  1. Source: Department of State, Central Files, 832.10/8–158. Confidential; Niact. Drafted by Arey and approved and signed for Dulles by Mann.